Engineering News

Fertilizer prices seen rising with U.S. corn acres
Thu Feb 22, 2007 11:31am ET

CHICAGO, Feb 22 (Reuters) - U.S. fertilizer prices are expected to rise significantly this spring as farmers gear up to plant the largest corn acreage in 60 years to meet strong demand from the ethanol industry, analysts said.

"Looking at this spring, the average price for nitrogen, potassium, and phosphorus is about 10 to 15 percent higher than it was last spring," said Jean Payne, president of the Illinois Fertilizer and Chemical Association.

"Exact prices vary greatly depending on where you are located and your relationship with your dealer," she added.

The highest corn prices in a decade, however, will help soften the blow on farmers and ensure they do not cut corners on fertilizer applications because a proper balance of nutrients will help maximize yields.

"You really can't have that 200 bushel-per-acre corn crop if you have nutrient deficiencies. Fertilizer is still one of the most economical agricultural inputs compared with the return on investment," Payne said.

"They're planting some very expensive corn varieties. Would you want to put that kind of investment out there and be short on your phosphorus and lose 40 bushels an acre?" she said.

FARM INCOME RISING

Farmers have struggled with high fertilizer costs in the past few years, along with high fuel prices, rising seed costs and soaring land rents, but the economic climate on many U.S. farms has changed drastically from just a year ago.

While input costs have gone up marginally, farmers are receiving far more for their grain this year.

Chicago Board of Trade soybean futures are 25 percent higher than levels of a year ago, while corn is up nearly 60 percent, hitting fresh 10-year highs on Thursday.

President George W. Bush last month called for a nearly five-fold increase in use of home-grown fuels such as ethanol to cut gasoline use by 20 percent over a decade.

Twenty percent of last year's 10.5 billion-bushel corn crop, or 2.15 billion bushels, will be used to make ethanol this year, according to the the U.S. Department of Agriculture. Analysts expect ethanol production to consume 3 billion bushels next year.

Farmers were expected to plant up to 12 million more acres of corn this spring than last year, according to analysts.

Some of the corn seedings will be at the expense of soybean acres and some will be on marginal land that is not typically used for planting row crops, both of which will need ample nutrients, fertilizer industry sources said.

Shares of fertilizer companies such as Agrium Inc., CF Industries, Mosaic, and Potash Corp. have climbed to multiyear or all-time highs on strong profit forecasts stemming from the robust demand.

But analysts said some of the fertilizer need has already been filled, which could limit price gains this spring.

Many farmers took advantage of warm weather in late fall and a mild start to winter to apply fertilizers, trying to avoid the expected surge in demand for specialized equipment and manpower during the narrow spring planting window.

"We had a wonderful fall application season. Very strong. Probably the strongest in the last 8 to 10 years," Payne said.

Forecasts for a wet spring due to the expected onset of a weak La Nina weather pattern have injected some uncertainty. Wet weather could stretch out the planting window and limit the supply crunch for application equipment and manpower.

However, if wet conditions persist, some farmers may scrap plans for seeding more corn and instead plant soybeans which need little fertilizer and can be planted later in the season.

"If there's a hiccup in (corn) planting and it looks like you're not going to get optimal yields, and the bean prices are up, you'll see people quickly interested in switching, particularly if it goes past that optimal planting window," said Don Roose, analyst and president of U.S. Commodities.

Source: Reuters

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